Buried in Section 885 of the current draft of the National Defense Authorization Action (NDAA) for Fiscal Year 2025 is a new attempt to figure out how to make unsuccessful bid protesters pay. As of this posting, the NDAA has not passed Congress or been signed by the President. But, like prior attempts, this effort to change the rules of bid protests seems more performative than practical as it is riddled with unanswered (and perhaps unanswerable) questions. Note that the current statutory text does not oblige the Government Accountability Office (GAO) to do anything other than write a proposal for Congress to consider, so it is entirely possible this effort will eventually die on the vine.
Section 885 contains two requirements: (1) an increase to the protest threshold amount for task orders issued under Indefinite Delivery, Indefinite Quantity (IDIQ) contracts awarded by Title 10 agencies (primarily, the Department of Defense (DOD)), and (2) submission of a “proposal” by the GAO to provide certain requested information to Congress in support of future efforts to make GAO protests more difficult and less attractive to pursue.
The task order threshold change is straightforward. Currently, with few exceptions, there is no jurisdiction anywhere for formal protests of task orders valued at less than $25 million under DOD, Coast Guard, or National Aeronautics and Space Administration IDIQ contracts. The 2025 NDAA will raise that threshold to $35 million. The $10 million threshold for task orders under civilian IDIQ contracts remains unchanged. This change will reduce protests around the margins but does not appear to be significant.
The other part of Section 885 is far less straightforward. Within 180 days of passage of the 2025 NDAA, GAO will be required to provide a proposal to the relevant Congressional committees. The GAO proposal must contain three things:
- Enhanced Pleading Standards: The GAO must confer with the DOD to propose “enhanced pleading standards” that an “interested party” must satisfy in a GAO protest before “such interested party” can receive access to administrative records of the DOD. This apparently intends to say that a GAO protest should contain a heightened level of factual allegations before the GAO will direct a DOD agency to produce relevant procurement records.
This language appears to have been drafted by individuals who have never litigated a bid protest at the GAO, at the instigation of agency functionaries who want to keep their procurement records from being audited. The drafters may be surprised to learn that the GAO already requires enhanced pleading for all protests, not just those against DOD procurements—pleading in excess of what is usually required in a court. Failure to meet this standard results not only in no document production, but also in summary dismissal of the protest ground. And the GAO is already far more deferential to agencies with respect to record production than courts are, and these productions generally occur with extensive redactions (usually based solely on what agencies decide the GAO and parties should see), under a protective order that prevents disclosure of the records to outside parties.
The bid protest function serves a necessary audit function—as evidenced by the number of protests sustained despite the significant deference given to agencies. This provision would seem designed to limit that function and runs counter to sunlight being the best disinfectant. In short, GAO’s most appropriate response would be to help inform legislators of its already enhanced pleading standards, and perhaps offer to clarify them in light of existing GAO decisional law.
-
Cost Benchmarks: Congress wants GAO to give it a “chart of the average costs to the DOD and the Government Accountability Office of a covered protest based on the value of the contract that is the subject of the covered protest.” GAO almost certainly does not have those data—but that isn’t the real problem. The problem is that this task is meaningless busy work. It is very unlikely that there is a direct correlation between a contract’s value and the cost of defending against a protest of that contract.
Congress also wants GAO to provide a “chart of the costs of the lost profit rates of the contractor awarded a contract that was the subject of a covered protest after such award.” This is more data that GAO will not have. Most fundamentally, an awardee does not lose profit as the result of an unsuccessful protest: its performance of the full contract is simply delayed, and any increased costs as a result of that are recoverable under the Protest After Award clause (FAR 52.233-3).
The statute, however, defines “lost profit” as “the profit that the contractor awarded the contract would have earned if the contractor has [sic] performed” during the protest triggered stay of performance. This, too, will be impossible for the GAO to quantify as most procurements are fixed price, and fixed price proposals rarely disclose the contractor’s anticipated profit rates, much less what that profit rate is anticipated to be during the first 100 days of performance, when a stay will be in place. In many multiple-award procurements where performance occurs under future task orders, there would be no profits in the first 100 days at all. In response to this request, it might be helpful for the GAO to highlight these issues.
-
Process for Payment: Finally, the GAO must propose a “process for payment by an unsuccessful party in a covered protest to the Government and the contractor awarded the contract” based on the “benchmarks” above. The statute assumes everyone knows what an “unsuccessful party” is. As bid protest litigators know, there is no such definition. Is an unsuccessful party a protester that receives a written denial on the merits after 100 days? A summary dismissal for some procedural foot fault within the first couple of weeks? Does a withdrawn protest count as unsuccessful? And, given the statutory text’s definition of a “covered protest” as one brought by an “interested party,” does that mean an unsuccessful protester doesn’t have to pay if the GAO ultimately dismisses the protest because the protester was not an interested party? That is how the statute’s text reads, but who knows what the drafters intended.
All this language appears to come from an assumption that most protests are frivolous and simply serve a delaying function, and Government agencies should be trusted to spend taxpayer dollars in wise, lawful, and efficient ways without contractors looking over their shoulders. Yet, year after year, the “effectiveness rate” of GAO protests hovers around 50%—an astoundingly high rate in light of the enormous deference agencies receive, and the blind eye GAO turns to a wide variety of agency errors and omissions that a protester cannot actually prove might have changed an award outcome. That is, roughly half of all protests filed with the GAO result in the Government taking corrective action of some sort due to real, prejudicial errors by the Government. To be more blunt: the Government gets it wrong essentially half the time in multimillion (or multibillion) dollar procurements that come under protest.
Against that backdrop, after protesters are forced to spend their own funds to identify Government errors and make the Government evaluate their bids fairly, the Government almost never has to pay the successful protester for the real cost of a successful protest. Under the current rules, a protester can recover costs only if a GAO protest is sustained on the merits or the Government otherwise “unreasonably” delays correcting errors brought to light by a “clearly meritorious” protest. Even then, the recoverable costs for other than small businesses are capped at levels that are far lower than modern legal fees. If Congress wants to adopt the English Rule for who pays for litigation, it might as well make it work both ways.
In any event, the statute does not establish a new loser-pays rule: it simply asks the GAO to work with DOD to propose one, presumably for some future NDAA to mandate or (as happened the last time) repeal. In the meantime, the Government people who are pushing this measure may want to review the RAND Corporation’s Congressionally-ordered report from a few years ago. That report found there was no epidemic of bid protests: only a tiny fraction of procurements are ever protested. It also recommended that agencies enhance the quality of debriefings and be more transparent to avoid unnecessary protests.
If something like the rule envisioned by Section 885 eventually comes into being, it will weaken a primary safeguard against sloppy and wasteful acquisitions and will reduce public confidence in the integrity of the procurement system. It also almost certainly will cause a further uptick of protesters going straight to the Court of Federal Claims with their complaints, where this loser-pays rule will be inapplicable, administrative records will remain unrestricted, and a growing number of judges are inclined to be more skeptical of agency decision-making than the GAO traditionally has been.
[View source.]
